October 22, 2021 - 5 minutes read

Mashujaa Day Goodies: A Look at Uhuru’s Economic Stimulus Strategy

By Francis Monyango

President Uhuru Kenyatta took advantage of Mashujaa Day celebrations on Wednesday, October 20, 2021, to announce a raft of economic measures and interventions his government seeks to make to reinvigorate the economy which is reeling from effects of the Covid-19 pandemic. 

President Kenyatta announced a new stimulus programme with 13 strategic interventions that will be effective on November 1, 2021. The Stimulus Programme targets key productive and service sectors in agriculture, health, education, drought response, policy, infrastructure, financial inclusion, energy, environmental conservation. 

  1. Tea sub-sector: The National Treasury was directed to allocate KSh. 1 billion in support of a fertilizer subsidy for tea farmers.
  2. Sugar sub-sector:The sugar sub-sector will be allocated KSh. 1.5 billion by the National Treasury as directed by the President. The money will be appropriated towards factories’ maintenance and payment of farmers’ arrears.  
  3. Coffee sub-sector: The National Treasury was directed to allocate KSh. 1 billion to the Ministry of Agriculture to be appropriated towards completion of the ongoing targeted interventions in the Coffee sub-sector.
  4. Livestock sector:Due to the effects of the ongoing drought, the National Treasury was directed to allocate KSh. 1.5 billion in support of communities affected by  the  drought  in  the  ASAL counties as part of the government’s National Livestock Offtake Programme.  
  5.  Livestock sector: Animal FeedsTo  secure  a  reduction  in  the  prices  of  animal  feeds, the President ordered the Cabinet Secretary for Agriculture, jointly with the National Treasury, to issue within 7 days, a framework that will  facilitate  the  reduction  of  the  cost  of  animal  and  chicken feeds.  
  6. Education Sector:Noting the success of the policy on 100% transition from primary to secondary education,the President directed the National Treasury to allocate KSh. 8 billion to the Ministry of Education for the CBC Infrastructure Expansion Programme.
  7. Health Sector: To enhance access to medical coverage across the country, and as part of the Universal  Health  Coverage  programme, the President directed the Ministry of Health to establish an additional 50  new  Level  3  hospitals,  to be  situated  in  non-covered  areas  and  densely  populated  areas across  the country. He also directed the National Treasury to allocate KSh. 3.2 billion for immediate  construction  of  the medical facilities.  
  8.  The National Sanitation Programme:Noting the success of the Kazi Mtaani Programme  and  its  effect on  enhancing  opportunities  for  the youth  across  the  country, the President directed  the  National  Treasury  to allocate  KSh.  10  billion  for  the  third  phase  of  the  Kazi  Mtaani Programme. The programme covering over 200,000 youth will be  rolled  out  in  all  counties,  with  priority  given  to  densely populated areas.  The Head of State said that the measures will inject an additional KSh. 25 billion into  the  economy and that they will complement the ongoing State interventions that are expected to sustain the momentum of recovery, with the year’s growth rate projected to be 6%.  
  9. Energy and petroleum Sector:President Kenyatta directed that:
    1. The  Ministry  of  Petroleum  &  Mining,  jointly  with  the National  Treasury,  to develop  by  December 24, 2021, a framework for stabilisation of petroleum prices, so as to cushion Kenyans against the turbulence caused by the volatility in fuel prices; and
    2. The Ministry of Energy to secure the full implementation of the Report of the Presidential Taskforce on Review of Power Purchase Agreements, that establishes a pathway for the reduction of electricity prices by 30 % by December 24, 2021, as the President looks forward to Kenyans being relieved of the burden of high tariffs by Christmas Day.  
  10. Banking Sector:The President stated that the implementation of the Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) framework by banks has  been  onerous  for  Micro,  Small  and  Medium  Enterprises(MSMEs). Cash still remains an important payment channel for MSMEs, representing 80% of all their financial transactions.  He ordered the National Treasury, after consultations  with  other  stakeholders,  to  immediately  cause  the upward  revision  of  the  cash  transactions  reporting  threshold from the  current  mark  of  KSh.  1  million  applicable  to  both withdrawals and deposits by customers. The financial institutions will retain their reporting obligations to the Financial Reporting Centre.
  11. Access to Credit:One of the Covid-19 emergency measures was the suspension of negative listing of loan defaulters  with Credit  Reference Bureaus (CRBs). This suspension lasted for six months,  from  April  to  September  2020,  and  provided  relief particularly  to  MSMEs  during  the  pandemic  period.  Since some MSMEs continue to struggle to get back to a sound footing following the adverse effects of the pandemic, the President ordered  the  National  Treasury,  in  consultation with all stakeholders to secure the following measures to provide further space for the recovery of MSMEs:
    1. The  relevant  authorities  will,  for  loans  less  than  KSh. 5 million,  effect  a  moratorium  of  listing  in  CRBs  for  a period of 12 months to end September 2022; and
    2. Borrowers with loans below KSh. 5 million listed with  CRBs  from  October  2020  to  date  will  not  have  that listing incorporated in their credit  reports  for  the  next  12 months, ending September 2022. The President also urged all banks and financial institutions to accommodate  customers  who  seek  to  restructure  their  banking facilities.
  12. Digital financial services:The  President directed  the  National  Treasury  to  engage  all  digital payment providers with an aim of deepening and expanding the use of digital payment channels.
  13. Vaccine production:In the spirit of self-reliance, the President announced that the government has established a  company  to  facilitate this venture in the name of Kenya Biovax Limited. The Ministry  of  Health was directed to operationalize the company to manufacture vaccines by Easter of 2022. 
Policy ramifications

Out of the 13 stimulus packages, only four need policy reforms to come to life. The rest only need the National Treasury to release funds.

Livestock sector: Animal Feeds  

On Tuesday, the Speaker of the National Assembly reported to the House that he had received a Petition signed by  five  representatives  of  livestock  producers  and  animal  feed manufacturers  on  behalf  of  the Broiler World Co-operative Society Limited, the Association of Kenya  Animal Feed Manufacturers, Kiambu Poultry Co-operative Society, Pig Producers and Githunguri Co-operative Society Limited, among other stakeholders. The Petitioners raised concerns regarding what they describe as unprecedented rise in prices of animal feeds in the country. They claim that the increase has been occasioned by policy gaps that have resulted in low production of plant-based animal feed components extracted from soya beans, sunflower and cotton, among others in the country. 

This petition, plus the Presidential directive, will lead to the National Assembly Departmental Committee on Agriculture and Livestock and the Ministry of Agriculture working together to find out the root cause of high cost of animal feeds. 

Energy and Petroleum Sector

The National Assembly has been working on reducing fuel prices through the Petroleum Products (Taxes and Levies) (Amendment) Bill, 2021. The aim of the bill is to review taxes and levies on petroleum products. This move may be complemented by the actions that will follow the President’s order that a framework for stabilisation of petroleum prices be developed. 

Banking Sector

There is a Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2021 in the National Assembly, but the Bill does not propose the raising of the amount limit. The Presidential’s directive may lead to more amendments being added to this bill.

Access to Credit  

The directive on the suspension of negative listing of loan defaulters with Credit Reference Bureaus (CRBs) was last year implemented following a circular from the Central Bank of Kenya and the regulator will definitely release a circular on this soon. In the same breath, we should expect further consultations between the National Treasury and the digital payment providers on how to expand the use of digital payment channels in Kenya. The Central Bank of Kenya Amendment Bill was read the third time this week and it will be interesting to see the direction of the engagements.

 

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